How to avoid 6 months waiting to sell a property to a BTL purchaser?

Hi John,

There is no firm rule that a purchaser cannot use a BTL mortgage within a given time frame of the vendor purchasing it.

The problem comes with the valuation. You have set your own comparable of price for the property which was the market value at the time. Why would a lender's valuer who knows the original purchase price value it higher unless you have carried out extensive refurbishment.

Therefore a lick of paint may add a very small amount, but you would need to show significant works and costs for a significant increase in valuation for a lender to max out on LTV.

But as you said a cash purchaser or someone who wants to borrow a small amount should have no problems.

Thank you Neil !

The future buyer actually is likely to use residential mortgage.

My problem is will any lender lend the future buyer if I haven't owned the property for 6 months?

The property is bought because the owner was facing reposession and sold it 30% BMV-enough to cover the outstanding mortgage and some cash for him.

Reply to the comment left by "Neil Patterson" at "18/11/2015 - 17:04":

Thank you Neil !

The future buyer actually is likely to use residential mortgage.

My problem is will any lender lend the future buyer if I haven’t owned the property for 6 months?

The property is bought because the owner was facing reposession and sold it 30% BMV-enough to cover the outstanding mortgage and some cash for him.

It very much depends on the lender.
In reality there is no such thing as a '6 month rule', but some lenders insist on it for varying reasons. There are lenders who will lend though. The buyer would have to speak to a whole of market mortgage broker to find one suitable.
However, as Neil says, the valuation could be a big issue, as they will go by the price a house has actually sold for. Most will just assume the condition of the property hasn't changed and won't take refurbishment into account. You also tend to find underlying issues which a refurbishment won't necessarily address, but a surveyor will find, such as damp, etc. For this reason I would say read your own valuation report carefully and ensure you address all issues noted as well as your own refurbishment.

We tried last year to buy a property that the vendor had owned for less than 6 months and could not find a mortgage provider to offer us a BTL mortgage. The property ended up being let by the owner as they did not find another buyer.

I believe Virgin money don't worry about the six month rule but their criteria are quite tight and you'll probably get a lower LTV offered??

I have always been amused by the concept of 'below market value'. Value is what one person will pay for a property in an open market. But of course if the market is illiquid or distressed then the value may be lower. But to an external viewer that was the value. Redecorating the property does not now change its value to the external viewer. Maybe undertaking significant changes does? But even here the cost of the change plus the original purchase price is surely the new value? Why should the external viewer now pay a premium? Now we all see these TV programs which show this happening, probably because the demand is high and people do not check the previous price paid. But if the demand is high then why was the market illiquid or distressed in the first place? If it was illiquid or distressed in the first place why has the market changed so that someone pays a premium? Does redecorating change the market?

Bottom line: mortgage providers will always want to check value, and will always be cautious. If you were the buyer wouldn't you?

And if you were the seller did you 'create value' or did you con the new buyer?

See discussion at http://www.property118.com/i-am-a-property-developer-ask-me-anything/44690/comment-page-19/#comments, which contains a link to an earlier discussion by Mark Alexander.

When you find a buyer, why not rent the house to them until the six months are up, then they will be free to submit a formal application for a mortgage? They should be able to get an Agreement in Principle beforehand, which will confirm to you that they can afford to buy.

Reply to the comment left by "Mike W" at "19/11/2015 - 11:25":

Dear Mike ,

That's the whole trick .The house on left and right down the street are the same comparable in structure and decoration and are selling 20 000 £ more exspensive .I have sold prices in the 1/4 mile radius which show that the house will go easily for at least 20 000 £ more even without me painting the walls and changing the carpets .

So that's the answer that the same show will give you I guess .

The bank will send the surveyour who will go through the same process and will reach the same conclusion as I already made above.

Dear John

I have occasionally come across the six month "rule" but would be confident that not every lender applies it; there is no legal reason that I am aware of for it to be applied, it is merely lenders' choice to manage risk in this way. I suspect that borrowing through banks rather than mortgage companies may help here.

As for below market value - take great care. I am a time served valuer and do investments for major banks. BMV comes up so often and is usually wishful thinking. If a seller was in distress they may sell BMW to release cash, but that is rare - and it is possible for a subsequently appointed Trustess in bankruptcy to unravel a deal just in case the sale was to a connected party (i.e. to hide cash). I have dealt with one of these so it can happen.

You would be best advised, as I think others have said here, to get a proper valuation of your own to check the Market Value. You do need to make sure you are fully informed before you buy.

I have valued houses a few weeks after purchase and a lick of paint, sometimes more, and it is rare that they have increased in value. Valuers and lenders will be suspicious unless there is significant work done. I am sorry that valuers will be wary but banks set criteria for reports and our PI cover is very expensive!

Graham